Lira has potential to recover some of its losses against greenback but it remains heavily dependent on context

World Bulletin / News Desk

The Turkish lira may strengthen somewhat from its current depressed level but it remains dependent on a calm context, inside and outside of the country, experts on emerging markets have indicated.

The Turkish lira reached a four-week high against the U.S. dollar on Monday with the dollar/lira exchange rate dipping as low as 3.6590.The exchange rate had hovered between 3.80 and 3.67 over the past two weeks after surpassing 3.94. It started trading at 3.6930 as of 9 a.m. (0600GMT) Tuesday morning.

Timothy Ash of BlueBay Asset Management said the Turkish lira seemed cheap compared to other currencies, claiming this would lead, save for unexpected domestic or international shocks, to the strengthening of the lira in the short and long term.

"I think from most matrices, the lira is cheap -- by historical comparisons, and versus peers," Ash told Anadolu Agency in an email.

Noting the global backdrop was currently beneficial for the lira, with the market expecting a rate hike by the U.S. Federal Reserve in March, Ash said it was also buoyed by stronger U.S. and global growth data as well as by the Turkish Central Bank's "dynamic" tightening.

"Risks for the lira could build though [going] into the referendum and the French presidential election in April. So we could see a bit more short-term lira strength over the next few weeks, but then a weakening again in March/early April, but assuming the referendum result is market friendly, [at the year's] end we could see the lira strengthen again," he added.

A referendum on the country's new constitution is expected to take place in April.